IVA (Individual Voluntary Arrangement)

As an increasing amount of people face ever-mounting debt, some have started to consider individual voluntary arrangements (IVAs) as a way of avoiding bankruptcy. First created in the 80s to help businesses avoid bankruptcy, they are now also available to individuals who are unable to solve their financial problems. An IVA is an agreement that you make with your creditors. You agree to pay a specified amount each month (usually at least $300 a month) for no more than five years, or a one-off lump sum (for example from remortgaging your home) and your creditors agree to write off the rest of your debt. The reason so many people are setting up IVAs every year is down to the huge benefits that can be had if you are finding it difficult paying back your debts. Once you enter into an agreement, all interest and late payment charges are frozen for the duration of the agreement, plus you are unable to be taken to court by your creditors and once the full amount of the debt is received by your creditors, your credit rating will improve. If you are looking at possibly bankruptcy due to large debts from credit cards, overdrafts, personal and business loans, store cards and catalogue negative balances then an IVA could be your best option for continued solvency. As long as you can either afford a single lump sum or monthly payments of a minimum of $300, then you may be able to reduce your debt by up to 75%. In order to set up an IVA, an insolvency practitioner must propose the agreement to your creditors; you are not able to propose it yourself. The charges that these insolvency practitioners charge you will vary, but most will take their fees from your monthly payments. It is always good practice to shop around for recommended insolvency practitioners as if up front payments are made and the agreement falls through then you have wasted money you have not got. $20,000 is commonly the minimum amount of debt you need in order to qualify for an IVA. The most important point to consider is that 75% of your creditors, that is, the creditors that own 75 per cent of your debt, must agree to the terms negotiated in the individual voluntary arrangement; if fewer than 75% agree, then you will have to consider other alternatives to protecting your solvency. If the remaining 25% do not agree, they are legally bound to the arrangement anyway.